The South Carolina Ethics Commission recently ruled that the Aiken City Attorney is “not subject” to state ethics law because he is an “independent contractor” and not an employee.

by Don Moniak
November 5, 2023

Introduction

The South Carolina Ethics Commission is charged with enforcing the state’s ethics laws. The agency’s website home page features its slogan:

“Restoring Public Trust in Government.”

A recent ruling by commission reaffirmed an obscure commission position and legal loophole: the state’s conflict of interest rules do not apply to independent government contractors, even contractors who write, review, and sign local laws.

City, County, and Town Attorneys who work under contract in their respective jurisdictions are exempt from accountability to the state agency responsible for enforcing state ethics laws. Those who receive a W-2 tax form can be sanctioned, those who receive a 1099 tax form are exempted.

For example, Aiken City Attorney Gary Smith works under contract and receives a 1099. Aiken City Solicitor Laura Jordan is an employee and receives a W-2. The City Attorney, whose primary roles include preparing laws that impact residents, nonresidents, and visitors, is not accountable to the Ethics Commission. The City Solicitor, whose primary role is working with public safety to enforce the law— but who can also act as City Attorney—is most certainly accountable to the Ethics Commission.

City and County Attorneys play a vital and important role, but one that arguably makes them the most powerful unelected authority in their jurisdiction. They are responsible for preparing new or amended local laws or ordinances, guiding City Council through the legislative process, and ultimately signing ordinances once they are approved. The City Attorney is also responsible for providing other legal advice to city officials, and ensuring that elected officials and employees undergo training and review of ethics and other pertinent state laws.

Unless City Council chooses to replace the present system via its current legal option to hire a City Attorney as bonafide employee; or to combine the City Solicitor and City Attorney positions into a single employee position, this lack of ethical accountability to the public agency charged with enforcing ethics laws will remain.

This situation is not endemic to Aiken, it is ubiquitious across the State of South Carolina, a quirk in the intepretation of state ethics law; an interpretation tolerated by the State Legislature and Governor’s office. For its part, Aiken City Council has no formal contract with City Attorney Gary Smith that could require strict adherence to state ethics law.

The Ethics Commission Ruling:

On October 27, 2023, the South Carolina Ethics Commission dismissed ethics complaints filed against Aiken City Attorney Gary Smith. The complaints alleged that Mr. Smith had violated state conflict of interest laws governing public officers, members, and employees by not recusing himself from:

1. The proceedings of an ordinance allowing the sale of city assets, known as the Mattie Hall properties, to an associate in his law firm; a process in which Mr. Smith represented the seller.
2. The Project Pascalis proceedings involving a partner in his law firm who represented the Pascalis developer RPM Development Partners, LLC.

After an investigation of unknown time and costs by its staff, the Commission opted to not rule on the merits of the complaints, or even address them. While the Commission wrote in its four-page Order of Dismissal that the case was dismissed due to “no probable cause,” the commission’s definition of probable cause in this case is that City Attorney Smith is not subject to the law because he is not a city employee, concluding that:

“…the Commission finds Respondent is not a public employee and is therefore not subject to the Ethics Act. Rather, Respondent is an independent contractor.”

Neither the complainants nor Mr. Smith were vindicated by the commissions decision to punt.

The Law.

Section 8-13-700(A) and (B) of South Carolina’s Code of Laws addresses conflict of interest in public bodies. Part (A) prohibits public officials from using their position to outright obtain “an economic interest” for themselves or their family, associates, and business interests. The threshold for an economic interest is an “economic benefit of $50 or more.”

Part (B) prohibits officials from even influencing a decision which might yield an economic interest, and requires a recusal if the bar for a potential conflict is breached:

“No public official, public member, or public employee may make, participate in making, or in any way attempt to use his office, membership, or employment to influence a governmental decision in which he, a family member, an individual with whom he is associated, or a business with which he is associated has an economic interest. A public official, public member, or public employee who, in the discharge of his official responsibilities, is required to take an action or make a decision which affects an economic interest of himself, a family member, an individual with whom he is associated, or a business with which he is associated shall:

(1)prepare a written statement describing the matter requiring action or decisions and the nature of his potential conflict of interest with respect to the action or decision.”

Part (B) is what was cited in complaints.

The Precedent

In 2014, the Ethics Commission ruled, in a case involving the Town of Chapin, that its Town Attorney was not subject to ethics law because he was an independent contractor and not an employee. That complaint was made by the Town of Chapin itself, and was dismissed without addressing its merits.

The Ethics Commission relied upon the Town of Chapin vs David Knight ruling to dismiss the complaints made against Aiken City Attorney Gary Smith.

The Investigation

An inquiry into whether Mr. Smith violated state ethics laws was conducted by the Ethics Commission staff. The extent and cost of that investigation is unknown. An email from City Councilman Ed Girardeau to City Manager Stuart Bedenbaugh, obtained via the Freedom of Information Act (FOIA), indicates that the Ethics Commission staff was scheduled to interview City Council members during the last week of May 2022.

The results of any commission inquiry beyond Mr. Smith’s employment are unknown because the commission itself only applied its “independent contractor” precedent, one that was already known to exist. The commission took at least six months to reach a foregone conclusion.

This is the third time an ethics complaint filed against Mr. Smith has been dismissed due to a technicality. In October 2022, Second District Court Judge Walton McLeod dismissed Complaints made by Aiken County residents Kelly Cornelius and Drew Johnson. The dismissal was not also based on the merits of the Complaint, but a jurisdictional technicality:

“The Appeal in its current procedural status cannot be maintained for lack of subject matter jurisdiction.”

It is notable that Defense counsel argued that allegations of state ethics laws violations should be heard by the state Ethics Commission and not the courts. The same argument has also been made twice in responses to the Blake vs City of Aiken et al lawsuit involving the entirety of Project Pascalis. That case remains under consideration by the court.

As reported in Keeping up Appearances, there is no dispute that Mr. Smith failed to recuse himself from the Pascalis process. His defense in the Pascalis lawsuit even included admitted to being present during the hearing of an ordinance to privatize part of Newberry Street and transfer ownership of it to RPM Development Partners. His first response to the lawsuit includes the following:

“With respect to the allegations set forth in Paragraph 165 of the Complaint this Defendant admits that he was present at the meeting of City Council held on March 28, 2022, but denies that he provided any specific legal advice to City Council regarding the Project given the fact that he believes that Mr. (Ray) Massey did possess an economic interest in the Project; this Defendant further states that if he did provide any such advice, such advice was offered innocently and by mistake, and without any intent on his part to create and / or violate any conflict of interest he may have had in his role as serving as the attorney for the City of Aiken.”

What is in dispute is whether his lack of recusals constituted a violation of ethics law. The merits of that issue have now yet to be addressed by the state Ethics Commission responsible for enforcing the law, nor by the courts that defer complaints to the Ethics Commission.

Public Officer, Member, or Employee: Differences in interpretation.

In the course of reaching its finding that state ethics laws do not apply to City Attorney Gary Smith— nor any other contract government attorney—the Ethics Commission cited the law, but then only applied one variable within it, the employee vs non-employee dichotomy. The commission did not address whether the City Attorney is a public officer.

In 2003, the Attorney General’s office had a different view of the City Attorney’s position. In a September 8, 2003, ruling, they issued an opinion that Mr. Smith’s role as City Attorney meets the criteria of a “public officer.” The AG’s office then opined that, as a public officer, Mr. Smith was ineligible to serve in a dual public office position:

“rather than as a public contractor or city employee, it appears to us that the City Attorney is a public officer.” (Figure 2)

The Power of the City Attorney.

As described in The Pascalis Attorneys, the City Attorney has an important, necessary, and powerful role in the legislative and legal processes of city government. (Figure 3) In any given month, the City Attorney undertakes a wide variety of tasks ranging from department level advice and document review to civil litigation to advising City Council at their meetings. The range of tasks can be seen in this series of redacted invoices from March to July of 2023.

An equally important factor is that the City Attorney is generally the only person providing legal advice during a public hearing where ordinances are discussed and approve or disapproved. City Council meetings are one of the few settings where a lawyer can enjoy the luxury of not being heard by a judge or be formally challenged by another lawyer.

In Aiken, the City Attorney is also the City Council’s parliamentarian, meaning they enforce Roberts Rules of Order at public meetings and public hearings. It is incumbent upon the parliamentarian to ensure that motions are made correctly, that all discussions are on the record, that closed-door meetings are conducted within the law, and that any question about a rule of order is addressed correctly.

An Inconsistency with City Ordinance: No Contract.

The Ethics Commission’s employee vs independent contractor position is compounded by another oversight in local law enjoyed by the City Attorney. As reported in The Aiken City Attorney: No Contract, as of October 2022, City Attorney Smith’s “contract” with the City consisted of a one-page letter dated December 28, 2016, to then City Manager John Klimm. That status appears to remain, as the issue has not been placed on City Council’s agenda in the past year.

However, City of Aiken’s Municipal Code states that a detailed contract between Council and the City Attorney is required:

“All appointments for city attorney and city solicitor shall require the execution of a contract which shall be prepared by the city manager’s office and must set forth the terms of the appointment to include compensation details, malpractice insurance coverage requirements, worker’s compensation insurance requirements, and other details which may be deemed important by the city manager and city council.”
(Section 2-81(c))

In response to FOIA requests, no such contract has been produced by the City of Aiken.

In comparison, City Manager Stuart Bedenbaugh also serves at the discretion of City Council, and is an employee under contract with them. His contract is renegotiated every three to five years, and he undergoes an annual performance evaluation.

The Legal Department Situations across Aiken County

The Ethics Commission’s October 27th ruling and its 2014 precedent create a double standard: state ethics laws apply to in-house counsel such as the City Solicitor and the Aiken County Attorney, but not for counsel in private practice who contract with a public body, such as the present City of Aiken Attorney.

The City of Aiken Municipal Code does allow for options in the structure of the City’s Legal Department, including:

1. A division of legal labor between a City Solicitor and a City Attorney, as is presently the case, or
2. Combining the City Attorney and City Solicitor’s position:

“The city attorney shall be appointed by, serve at the pleasure of, and be subject to removal by the city council. The city council, with the advice and consent of the city manager, may appoint one person to serve as the city attorney/city solicitor, and in the event of such appointment, it shall be considered one position or office.” (Section 2-281(a).

This combined position was in effect in the early 1990’s, when Attorney Jim Holly served as an in-house City Attorney. Mr. Holley then served in other government agency legal departments, before returning to Aiken County to serve as the in-house Aiken County Attorney from 2007-2009, and again from 2014 -2020.

Presently, he works in private practice, which includes a $275 per-hour contract with the City of Aiken to represent the city’s autonomous Design Review Board (DRB), legal counsel during the City Council redistricting process, and as co-counsel for the DRB in the Pascalis lawsuit. Yet, in these influential and important roles, Mr. Holly is also not accountable to the Ethics Commission, according to its ruling.

Another independent contractor, the Pope-Flynn law firm, acted as legal counsel to the Aiken Municipal Development Commission (AMDC).
According to invoices obtained through the public record and supplemented with FOIA requests, the law firm of Pope-Flynn billed the Aiken Municipal Development Commission (AMDC) and City of Aiken a combined ~$144,000 for Project Pascalis work completed between February 2021 and September 2022.

According to the Ethics Commission, their attorneys were also not subject to state ethics law in their capacity as independent contractors.

What could a change in legal department structure cost?

The current City Solicitor, Laura Jordan, oversees a very large department. She is responsible for supervising the Municipal Court, prosecuting crimes deemed within the jurisdiction of that court, and enforcing the Freedom of Information Act. Any City Solicitor is qualified to act as City Attorney because they must be in good standing with the bar to be qualified for either position. Good standing is the only legal qualification for the City Attorney.

In spite of this large responsibility, the City Solicitor’s salary is 20-30 percent less than the Directors of the Departments of Risk Management, Public Works, Planning, Parks and Recreation, IT, Engineering and Utilities, and Economic Development. The only Department heads who make less are responsible for maintaining the natural beauty of the city and insuring that large city contracts are executed in a proper fashion.

The City Attorney’s “agreement” calls for a monthly retainer of $4,000 per months for thirty hours of service, or $133 per hour. Beyond the thirty hours, the billable rate is $150/hour. This hourly rate is four times greater than that of the City Solicitor, although the latter does receive City employee benefits. The base “salary” for the City Attorney is $48,000 a year for thirty hours of work per month.

Mr. Smith does not always bill for thirty hours per month. In 2021 his firm, Smith Massey Brodie Guynn and Mayes (SMBGM) billed the City a total of $48,903 for his work. The firm also billed the city another $3,810.00 for Project Pascalis related work, including a $3,150 title search on the Hotel Aiken and Anderson (Newberry Hall) properties. (Figure 4)

Costs that are more difficult to measure involve the presence or absence of litigation related to legal counsel, such as the Pascalis lawsuit, and public trust in city governance. In the aftermath of the Project Pascalis failure, Councilwoman Lessie Price spoke of the cost of losing the public trust, stating on January 13, 2023 that:

“I am in agony sitting here, for many reasons. One reason is that I cannot let the AMDC take the full blame for what has transpired. Council shares in that blame…there is nothing worse than losing the trust of your spouse, your children, and especially this community. We do not want to do that. We want to build trust. As one Council member, I want to apologize to the community. (51:40 mark of meeting)

Will There Be Change?

In early August, the Aiken Chronicles asked all three Mayoral candidates a series of questions. Candidates Teddy Milner and Kathryn Wade answered the questions. Mayor Rick Osbon chose not to answer the questions.

One of the questions pertained to the City Attorney’s position:

“To avoid future conflicts of interest, should the City hire an attorney on staff, (as is the case with the Aiken County Government), whose only client would be the City of Aiken?”

The candidates answered as follows:

 KATHRYN WADE: I do believe the city should have their own attorney on staff.  Aiken is a growing city and our issues are becoming more complex.  I think having someone who is single-mindedly devoted to the best interests of our city is a key to our strong future.

TEDDY MILNER: Yes! In addition to a dedicated City attorney, the City Finance Department also needs an auditor.

During the Primary election, 58 percent of voters approved a change in the Mayor’s office by voting for either Ms. Milner or Ms. Wade.

Ms. Milner is presently the only candidate on the ballot for the November 7th General Election. However, the race is not decided, as there is a stealth campaign ongoing to write in lame-duck Mayor Rick Osbon; a campaign Mr. Osbon denies any involvement with.

Summary

Because he is an independent contractor and not an employee, Aiken City Attorney Gary Smith is presently not subject to state ethics laws enforced by the from the South Carolina Ethics Commission. Any replacement independent contract City Attorney will also be accountable to the agency.

There are two issues at stake. First, did City Attorney Gary Smith violate state ethics law? The SC Ethics Commission will not rule on that matter, and the courts are wary of hearing the case in their jurisdiction and tend to defer to the Ethics Commission.

Second, should the City Attorney’s position, regardless of the outcome of question #1, be an in-house position requiring full-time devotion to City legal matters?

No matter who wins the Mayoral election, those two issues will remain.

In any scenario, citizens have already sent a message that the City’s legal department needs a thorough review and a change in structure.

Many citizens have called for City Council to replace City Attorney Gary Smith. On April 24, 2023 Aiken resident Luis Rinaldini went even further, arguing to City Council that the law office of Smith, Massey, Brodie, Guynn, and Mayes should be banned from doing business with the city:

“I just can’t help but saying that Mr Smith’s and Mr Smith’s Law Firm has a terrible record of property deals with the City of Aiken. Some of them are highly questionable. I’ve spoken to the city about it numerous times. We still haven’t heard back (to a request) to try to rescind the Mattie Hall property sales. There were other questionable deals on the SRP property, and the questionable deal in the middle of Project Pascalis to sell the L-shaped portion of the Municipal Building and the parking lot across from the hotel to another LLC sponsored by Mr Massey. This is not a good record. I am on the record saying that I don’t think the firm of Smith Massey should be doing anything with the city. It probably should be banned from doing business with the city for 10 years.” (2:35 of meeting) 

Aiken City Council has, as a whole, publicly ignored these issues. Whether the latest accountability punt by the South Carolina Ethics Commission incites City Council to better perform its statutory duties in its supervision of the City Attorney’s office remains to be seen.

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